First, in August 2010, the Indiana Utility Regulatory Commission (IURC)
issued an order in NIPSCO’s first electric rate case in 24 years,
authorizing an increase in residential rates of 16.8 percent (although the
IURC itself estimated that its order would result in a net increase for
households of only around 10 percent).

Then, in January 2011—amid a hue and cry raised not only by the Indiana
Office of Utility Consumer Counselor (OUCC) but by a coalition of Northern
Indiana municipalities—NIPSCO sought to quash that first rate case and filed
a second, proposing instead an increase in residential rates of 7.9 percent,
or exactly half of the originally authorized 16.8 percent.

Now, under a settlement agreed announced today, households would see an
electric rate hike of just 4.5 percent, or approximately $3.33 per month.

NIPSCO reached that settlement late Monday night with the OUCC, its
industrial customers, and the Northern Indiana municipalities. The IURC must
still approve the agreement, although NIPSCO anticipates that, pending IURC
review, the new rates could take effect late this year or early in 2012.

“The settlement also eliminates any further action around the company’s
(initial) rate case,” filed in August 2008, NIPSCO said in a statement
released this morning. The 16.8 percent residential hike authorized by the
IURC last summer was never actually applied to customers’ bills, the company
noted.

“This settlement balances the interests of our diverse customer base, while
providing a solid foundation from which NIPSCO can invest in Northern
Indiana’s energy infrastructure to help fuel job creation and economic
growth,” NIPSCO CEO Jimmy Staton said. “Together, the parties have reached
an agreement that provides Indiana families, businesses, and industries with
the affordable, reliable, and environmentally sustainable energy they need
now and in the future.”

“If approved” by the IURC, “this agreement will bring a fair resolution to
litigation that has been before the IURC for more than three years,” Utility
Consumer Counselor David Stippler said. “Regulatory review of NIPSCO’s
electric rates has been a complex process given the fact that these rates
have not been modified since the 1980s. I am pleased that the OUCC, NIPSCO,
and the other settling parties have been able to fairly address all pending
issues, thereby providing a balanced resolution for the benefit of all
NIPSCO customers, while ensuring that NIPSCO may continue to make needed
investments to provide safe, reliable service.”

“We believe the concerns raised by the local municipalities were addressed
through this process, which was both open and collaborative,” said Michael
Griffin, representing the municipal coalition comprised of Dyer, East
Chicago, Griffith, Highland, Munster, Schererville, Valparaiso, and
Winfield. “This agreement provides a fair and reasonable solution for local
communities across Northern Indiana working hard to manage very tight
budgets.”

NIPSCO: How
Customers

Would Benefit

NIPSCO said that the announced settlement would benefit customers in several
ways. Average household customers, for instance, would see a “minimal bill
impact” of 4.5 percent or $3.33 per month. Under the increase originally
authorized by the IURC last summer, average households would have seen an
increase of 16.8 percent or $13.39 percent.

The settlement also provides a “platform for ongoing NIPSCO investments in
improving customers services, reliability, and environmental
technology—including the recent $330 million purchase of the highly
efficient 535-megawatt Sugar Creek natural gas-fired electric generating
plant,” the company said.

In addition, the settlement provides for “NIPSCO-funded rebates to convert
electric furnaces to more efficient gas units,” NIPSCO said, as well as
addresses the municipal coalition’s “concerns regarding rates for
streetlights and traffic lights.”

How NIPSCO’s
Electric

Rates Compare

NIPSCO noted that, while its electric rates for all classes of customers are
higher than the average in Indiana, the new rates would still be lower than
other Midwest states’ average or the national average, according to the
current Edison Electric Institute’s survey:

NIPSCO was unable to generalize about how the settlement would affect
industrial and commercial customers.

“The impact on individual commercial and industrial customers will vary,”
the company said. “Many factors determine commercial and industrial
customers’ rates. On average, rates for commercial and industrial customers
would increase approximately 4.8 percent to 11 percent per month compared
with current bills.”

The settlement does include an expanded “interruptible service” component,
“which provides incentives for NIPSCO’s largest industrial customers to
reduce or shift energy use. This voluntary program ultimately benefits all
customers by meeting near-term and planned system needs, including periods
of peak demand when market prices are high.”

Cost associated with expanded interruptible service will “eventually be
shared across all customer classes, with no impact on customer bills until
May 2012 or later,” NIPSCO said. “Residential bill impacts will vary
depending on customer participation in the voluntary program.”